New Hepatitis C Drugs Strain California’s Medicaid Budget

High cost hepatitis C medications are adding up for California’s state medicaid program.

Private health plans invoiced the state of California $387.5 million to cover high-cost hepatitis C treatments in Medi-Cal between July 2014 and November 2015, when just 3,624 patients received the treatments, according to the California Department of Health Care Services.

The state’s supplemental payments started after managed care plans that cover health services for almost 80 percent of Medi-Cal recipients raised “alarm” about the high cost of the new drugs. The hepatitis C treatments were eating into financial reserves, said Charles Bacchi, president of the California Association of Health Plans, an industry trade group.

“Dollars that were intended for a wide array of medical services started being gobbled up by just one drug,” Bacchi said.

The health insurance companies are usually paid a flat rate per member to cover all health care needs. The Department of Health Care Services says this is the first time the state has paid health plans extra money to cover high-cost drugs. Sovaldi, a hepatitis C drug retailing at $1,000 per pill, has sent treatment prices soaring. The drug is made by Gilead Sciences of Foster City, Calif.

A mix of federal and state dollars paid health plans an average of nearly $107,000 per patient over 16 months. The spending covered the cost of Sovaldi and Harvoni, another new and expensive drug, as well as other drugs involved with hepatitis C treatment.

The funding will continue next year: The state health care agency has budgeted $303.4 million in supplemental drug payments for health plans for 2016–17.

Although the members of Bacchi’s trade group benefit from the additional funding stream, he says the state’s supplemental payments aren’t a “sustainable” solution.

The state receives some money back from drugmakers in the form of rebates. The ultimate price paid for drugs is confidential, according to the state health agency.

A ballot initiative aimed at limiting the cost of pharmaceuticals is expected to go before voters this November. The measure would limit the amount the state pays for a drug to no more than the lowest price paid for the same drug by the Department of Veterans Affairs.

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